Japan Keeps Budget Surplus Outlook despite Defense Boost

Prime Minister Fumio Kishida speaks at the Prime Minister’s Office on Tuesday.
16:10 JST, January 25, 2023
TOKYO (Jiji Press) — Japan’s Cabinet Office on Tuesday maintained its projection of achieving a primary budget surplus in fiscal 2026 under an optimistic scenario, despite a planned massive increase in defense spending.
The government agency included the projection in its medium- to long-term economic and fiscal forecasts submitted to the Council on Economic and Fiscal Policy, headed by Prime Minister Fumio Kishida.
The government expects ¥43 trillion in total defense spending over the five years from fiscal 2023 as part of efforts to raise the size of its annual defense-related expenditures to 2% of gross domestic product.
As in its previous forecasts released last July, the Cabinet Office said the country will be able to achieve a primary surplus in fiscal 2026 if the Japanese economy continues high growth of some 3% in nominal terms and 2% in inflation-adjusted real terms, citing measures to realize a new form of capitalism, a signature policy of Kishida.
But the assumed economic growth rates are highly optimistic. Since fiscal 1995, the nominal rate exceeded 3% only in fiscal 2015.
In addition, the Kishida administration plans to double the government’s child-related budget, making the primary surplus projection look even more unrealistic.
A primary budget surplus means that the government can cover expenditures other than debt-servicing costs with tax and other revenues without relying on new debt issuance.
In the latest forecasts, the Cabinet Office put the estimated primary balance for fiscal 2025 at a deficit of ¥1.5 trillion, up ¥1 trillion from its previous forecast chiefly due to higher defense spending.
But if the government successfully continues to rationalize spending including by curbing social security cost growth, it would be able to achieve a surplus of ¥1.1 trillion in fiscal 2025, the Cabinet Office also said.
The latest forecasts “have shown that the country would be able to achieve a primary budget surplus in fiscal 2025 if it continues spending reform efforts,” Kishida said at a meeting of the council.
“Although it’s not easy to achieve that amid increasing uncertainties, we will continue our efforts to balance economic revitalization and fiscal reconstruction,” he added.
The Cabinet Office also announced projections under a baseline scenario, which puts both nominal and real economic growth rates around 0.5%.
Under the scenario, the country is expected to log a primary deficit of ¥5.1 trillion in fiscal 2025 and stay in the red after that.
"Politics" POPULAR ARTICLE
-
Farm Ministry Eases Rules for Release of Stockpiled Rice; Govt Criticized for Slow Response to Soaring Prices
-
LDP Money Scandal Hits Tokyo Metropolitan Assembly; Ruling Party Worries Over Effect On Summer Elections
-
Noda Questions Ishiba on Corporate Donations, Surname System; Disclosure Not Prohibition, PM says
-
Japan Intends to Boost Defense Capabilities on Yonaguni Island; Area Set to Deploy Ballistic Missile Countermeasures
-
Laos Prime Minister Set to Meet with Japan Prime Minister Ishiba During Visit to Japan From Tuesday
JN ACCESS RANKING